China boosts defence budget by 7%

China's National People's Congress (NPC) provided no breakdown on numbers on its defence budget increase, but NPC spokesperson Fu Ying confirmed an increase of 7%. This would bring the number to over a trillion yuan (RMB1.044 trillion or $151.5 billion) for the first time in China's history.

The amount, about 1.3% of gross domestic product (GDP), was an increase from $146.6 billion in 2016, but growth slowed from the double-digit increases that began in 2000 and ended last year with only a 7.6% increase.

The lack of transparency on how the budget will be divided amongst the armed services is not new, but one US defence source said there were two things to consider. First was that the budget continues to increase, even though double-digit rises have ended.

Second was that China's economic growth means that GDP has increased, so the military is taking a much greater share of GDP than before. He suggested both of these considerations should be analogous to compound interest.

Suggestions that China's continued budget increase is in reaction to US President Donald Trump's announced plans to increase the Pentagon's budget are a non-sequitur, since the Chinese budget was compiled long before the November elections in the US.

There has also been a massive change in how the military manages spending. In January 2016, as part of organisational reforms, the Audit Office of the Central Military Commission was formed to bring the military's overwrought budget demands under control, said Ching Chang, a research fellow of the Taipei-based Society for Strategic Studies and a former Taiwanese naval officer.

In part, this was to also control corruption, which is a major policy objective of Chinese President Xi Jinping.

Before that, the military's budget auditing and management system was under the General Logistics Department of the People's Liberation Army. Military regions also conducted their own auditing functions within their areas of responsibility. These were akin to independent kingdoms that behaved like spoiled and jealous children, Chang said.

The Audit Office will use computers to wire money, which will also reduce corruption, Chang said. 'In the old days, the military had to allocate significant amounts of funding to subordinate commands coping with unexpected contingencies.'

This turned into a 'private vault' for military commanders to use as they would a 'warm bed'. The computer networks will provide efficiency by eliminating waste and thus actually increase the budget as a result, he said.